Climatetech market pressures and opportunities

Last month, I talked to 40+ finance professionals working across the climate capital stack. Here are the most pressing challenges, opportunities, and insights that emerged: ⚙️ Hard Problems - Even proven tech struggles to scale: EV chargers and energy storage are mature technologies, but their merchant risk makes traditional project finance models break down. - First-of-kind (FOAK) projects remain fundamentally hard: LPO funding is likely ending, and few alternatives exist. The good news? Several new funds are targeting this gap - worth watching closely. 💬 Communication Challenges - The climate finance ecosystem speaks multiple languages: VCs talk TAM and dreams, project finance talks DSCR, insurers talk actuarial risk. Getting deals done requires translating between all of them. - Risk/reward misalignment plagues deals: Startups and VCs chase upside, but deployment partners bear downside risk. This fundamental tension delays scaling. - Climate still fights for credibility: "Senior stakeholders don't even understand Scope 1, 2, and 3," one banker shared. "Anything labeled climate gets immediately written off as concessionary." 📚 Knowledge Gaps - Deal structures remain bespoke: While startups have SAFEs and mature sectors have established project finance precedents, new climate technologies lack standardized financing models. Knowledge sharing between successful deals is almost non-existent. - The "finance-ready" paradox: Capital exists, but most projects aren't structured to receive it. Companies often start thinking about project finance years too late. 🌡️ Climate Risk - Insurance is the canary: Companies are pulling out of high-risk regions and wildly hiking rates. - Markets haven't caught up: This risk repricing isn't reflected in broader valuations...yet. - This disconnect is both terrifying and the biggest opportunity in the space. 🔥 Hot Topics - Nature & Biodiversity: Hard to quantify but drawing serious LP interest - Resilience & Adaptation: Finding new momentum as climate impacts accelerate and we prepare for a "don't-say-climate" presidency - Data Centers: Energy use + AI boom = unavoidable focus - Geothermal: Rising star for baseload power, especially post-Fervo - Global Standards: EU's CSRD and Carbon Border Adjustment Mechanism will reshape supply chains regardless of US policy, with real ramifications for manufacturers in Asia and beyond. These conversations revealed just how hard—but also how essential—it is to align incentives, build trust, and bridge knowledge gaps across the climate finance ecosystem. As Eugene Kirpichov just wrote—we need systems thinking if we're going to tackle these wider problems. Anything missing here? What's on the top of your mind for 2025?

Did Climate tech decline in 2025? Here is my take: -Total VC and growth funding was flat year-over-year (less than 10% increase even). I take this as good news given the current anti-climate environment we are in. - AI's insatiable appetite for power became the unexpected forcing function. Data centers needed clean, reliable energy at scale... and suddenly climate tech had a customer with deep pockets and urgent timelines. This drove a fundamental shift in how climate tech gets funded. The market matured fast, with a growing share of capital coming from non-dilutive and blended-finance structures rather than traditional equity rounds. This is where hard tech, capital-intensive technology funding needs to be, and I hope it will lead to more funding mechanisms that are not venture capital. Sector winners : Nuclear: Absolute monster year. Advanced nuclear and small modular reactors attracted some of the largest funding rounds, driven by AI and data center power demands Geothermal: Momentum continued with substantial investment growth, benefiting from drilling innovation and oil & gas talent crossover, again all driven by data center power demands Grid tech: Massive growth as utilities raced to keep up with demand and reliability pressures. Grid modernization became a core infrastructure play Energy overall: Surpassed transportation as the most-funded vertical for the first time in recent memory, highlighting the shift toward energy-supply decarbonization Sector Losers 🙁 : Hydrogen: Funding collapsed 63% YoY as policy support weakened and project economics failed to pencil out. Wave of bankruptcies and consolidation followed Vertical farming & alt protein: Continued consolidation and closures EVs: Market stalled in the U.S. (though stayed strong internationally) Over all, fewer deals, bigger impact, better capital - that's maturation, not decline. And we can all thank AI. #ai #datacenters #yearinreview #climatetech2025 #climatetech #energytech #venturecapital

🔥 The Future of Climate Tech: 5 Takeaways from Hello Tomorrow 🔥 Busy days last week at Hello Tomorrow in Paris—lots of discussions, strong opinions, and a fair share of debate on the past, present, and future of climate tech. Moderating a panel on the topic, I had the chance to challenge some of the sharpest minds in the space: Liza Rubinstein Malamud (Carbon Equity), Rajesh Swaminathan (Khosla Ventures), and Laurie Menoud (At One Ventures)—right on stage at Hello Tomorrow. So, where does climate tech really stand today? Here are 5 takeaways that stood out: 1️⃣ Climate Tech’s Darwinian Moment Laurie put it bluntly: climate tech isn’t dead, but many companies relying solely on subsidies will be gone in the next 1-2 years. The survivors? Those with better performance and lower costs than existing alternatives. Capitalism is simple—if oil makes money, that’s where it goes. Climate solutions need to be a no-brainer. 2️⃣ US vs Europe: be resilient The panelists emphasised the importance of building business models that can thrive regardless of policy shifts or geography. At the same time, Liza urged European founders to think bigger. Meanwhile, Rajesh reminded us that “yesterday’s tweet” shouldn’t dictate investment decisions—the real wins come from betting on long-term, high-impact inflection points. 3️⃣ What’s Hot, What’s Not This topic itself was hot—plenty of debate, opposing views, and strong opinions. But there was clear consensus on one thing: the only metric that truly matters is strong unit economics. Without it, even the most innovative tech won’t scale. And yes, AI is hot and can play a role in climate, but beware of “AI washing.” It works when it adds real value—think accelerating mineral detection for mining or power management for data centres. 4️⃣ Making Money with Climate Tech Liza, speaking as a fund-of-funds manager, was very clear: climate tech has performed on par with general VC and PE. Cambridge Associates and Dealroom data back this up—the returns are there. In their portfolio, TVPI looks strong, but there’s a catch: lots of unrealised returns. The big question? Will markets open up again this year? That remains to be seen. 5️⃣ The #1 Rule for Climate Founders Laurie’s advice? Forget politics. Focus on economics. The best solutions will win because they outperform and underprice existing options. Rajesh added: the team you build is the company you build—hire talent from industries that have scaled successfully before. And Liza? Plan your entire fundraising journey early—each stage demands a different strategy. 💡 The TL;DR? The market is tough, but winning in climate tech means playing the long game—building companies that make sense with or without policy tailwinds. Last but not least, a big thank you to Arnaud de la Tour, Selma El Ouardi, Jack Fox-Male, and the entire Hello Tomorrow team—great work, and see you next year in the Netherlands! 🇳🇱 #venturecapital #climatetech #liveandkicking

Last week I caught up with some of our climatetech founders and the Wavemaker Impact team in Singapore. It reminded me how much Europe could learn from the pace, creativity, hunger and grit of emerging markets when it comes to building climate solutions. In South Asia, you don’t have the luxury of slow progress or “pilot purgatory.” Climate impacts hit hard and fast, so the innovation mindset is lean, practical and deeply connected to livelihoods. 1. The Green Discount Forget moonshots and massive R&D budgets. Across South Asia, founders are building cleaner and cheaper solutions that work now: modular, low-capex climatetech with real unit economics from day one, like turning waste into biofuel (Octayne) or agricultural residues into biochar (WasteX) while improving customer margins. ✅ Lesson for Europe: Move beyond the “green premium.” We don’t always need new tech; we need to deploy what already works, faster and at scale. 2. Decentralised Energy and Leapfrogging Like Africa skipped landlines to go mobile, South Asia is leapfrogging traditional grids with off-grid solar, microgrids and batteries replacing diesel, from Agros to Helios Solar Company Limited and SOLshare. ✅ Lesson for Europe: Distributed renewable energy isn’t just cleaner; it’s more resilient. Energy security in wartime or flood season may depend on it. 3. Nature-Based and Community-Led Solutions After decades of deforestation and degraded land, pioneering models are fighting back through community reforestation, mangrove restoration and regenerative agriculture. Ventures like Bumi Baru and Fair Ventures Social Forestry make nature profitable by working with local populations. ✅ Lesson for Europe: Climate action sticks when people have skin in the game. Build with communities, not just for them. 4. The Just Green Transition In emerging markets, climate isn’t a distant moral issue; it’s a development and equity issue. Policy conversations link emissions to jobs, food and public health. When clean tech creates livelihoods, people back the transition. ✅ Lesson for Europe: Embed justice, inclusion and affordability at the heart of the transition, not as an afterthought. 5. Adaptation and Resilience South Asia is among the most vulnerable regions to climate change and has no choice but to adapt: flood defences, early-warning systems, better weather data and climate-resilient crops. Ventures like Rize and Intensel Limited prove that resilience and profitability can coexist. ✅ Lesson for Europe: Don’t just decarbonise, adapt. Resilience is also an investment class. After more than two decades building start-ups across Asia, I’ve seen how constraint breeds creativity and urgency drives focus. Europe has the capital, talent and technology. Maybe it also needs a bit more of that emerging-market scrappiness and hunger. Because the truth is, we don’t need to reinvent the wheel. We just need to roll it faster. 🌍💚

50+ business opportunities from climate change adaptation and resilience🌍 The economic map of climate action is shifting quickly. Adaptation is moving from a side topic to a full marketplace with its own technologies, services, and solution clusters. The driver is clear. Physical risk is shaping decisions in companies, cities, and financial institutions. And this is opening a wave of commercial activity across food systems, infrastructure, health, water, energy, and biodiversity. The scale is expanding fast. Remote sensing, climate forecasting, resilient materials, cold resistant crops, atmospheric water harvesting, advanced cooling, and restoration services are entering mainstream planning. Each solution responds to a direct vulnerability created by a hotter and more volatile climate. The signal is impossible to ignore. The world crossed 1.5°C for the first time in 2024 and climate related losses have already exceeded $3T over the past 15 years. Risk is now operational. This is why adaptation investment keeps rising. Cooling technologies are scaling. Resilient construction materials are growing. Data driven climate analytics are advancing at 25 percent to 30 percent in several markets. The trajectory now mirrors the early expansion of mitigation but with wider reach across every sector. Instead of a few anchor technologies, we now see 60 plus adaptation opportunities forming a connected ecosystem. Each connected to essential functions such as safety, reliability, continuity, and protection. For business leaders, this shift is material. Adaptation is becoming a strategic capability. And understanding this landscape is now part of long term competitiveness. This is where the next wave of climate related value creation is emerging. Source: Already a Multi-Trillion-Dollar Market: CEO Guide to Growth in the Green Economy by the World Economic Forum and BCG #sustainability #sustainable #esg #climatechange

If we’re being honest, we’ve all already felt this coming — but now the data is definitive. The H1’2024 climate tech funding market has fallen back to 2020 levels. Nothing’s particularly new, though. Since the peak of Q3’21 madness, the climate tech market has been consistently constricting. And to be fair, the market slump isn’t limited just to #climatetech; the broader venture market continues to retrench, be it from sticky inflation, high interest rates, or geo/political chaos. What’s actually novel is that the downtick in funding & deals has finally reached the early stages, and that former darling companies have officially shuttered. Outcomes & key stats: 📉 Seed activity tumbled -30%, echoed by a -25% hit to Series A and B activity, signaling the end of early-stage resilience to the downturn. ⏱ Raising a Series B now takes 2.5x longer than in 2021. 💔 Ten notable climate tech companies filed for bankruptcy in H1’24 including Fisker, Arrival, and Running Tide. The impact to the nascent Carbon sector can’t be overstated, nor is this likely the last shakeup to a former darling startup. 👻 The tourist investors have gone home (-44% count of unique investors), slowing the deployment rate of climate specialist funds. Call it dry powder, slow to fire. Drivers to watch closely: 1️⃣ Graduation rates:  The cohort founded at the start of climate tech’s resurgence in 2018-19 are quickly approaching the Series B cliff. Expect a surge of B-stage urgency to awkwardly coincide with investors taking their sweet time on due diligence (time to raise jumped from 11 to 26 months between rounds!). Meanwhile, growth investment and deals have also dropped precipitously. Late-stage funds are holding on to record levels of dry powder, while holding out for more concrete proof of commercialization and ARR goals. 2️⃣ Fewer, bigger — but better? Despite deal activity rates declining, the deals that did sign & wire were larger and healthier. The average Seed deal size rose 21% verses the year prior. In particular, deep tech startups were able to successfully raise larger rounds. Case in point: Industry sector deals count dropped -41%, while the average Industry deal size jumped +29%. 3️⃣ Sophisticating capital stack:  Despite our “CTVC” name, we’ll be the first to say that the strongest climate tech companies leverage the full climate capital stack -- beyond just venture capital. Many of the most notable deals from the last six months came from companies graduating from equity to project finance and debt in the race to deploy, deploy, deploy. Namely, advanced geo developer Fervo Energy, thermal energy storage provider Antora Energy, and textile-to-textile recycler Syre raised massive rounds for hardware buildouts. Plus, steelmaker H2 Green Steel, lithium extractor Lilac Solutions, and LAES developer Highview Power all raised “FOAK” rounds to support commercial-scale projects. Check out the full Sightline Climate (CTVC) analysis below 👇

I asked 3 well-respected and insightful climate tech investors their advice about navigating this uncertain moment in the market. Here's what they said: Amy Duffuor, Co-Founder and General Partner at Azolla Ventures: "In this moment, we're supporting our companies with two things: 1) In 2020-2021, there was so much capital flowing into climate and a lot of investors were managing their portfolios so that management teams would be strong fundraisers only. That's not the right way to build a strong, self-sustaining business. You need to be an operator first and focus on business fundamentals. 2) We should be building diverse investment syndicates that aren't dependent on climate tech investors--bringing in sector specialists, geographic specialists, and generalists. That way when capital is restricted downstream, you've diversified the ecosystem of investors you can go to, which helps mitigate risk." Terry Kellogg, Managing Director at Helios Climate Ventures: "The investment has to be able to stand on its own regardless of policy changes. From our perspective, in this moment we're looking at the end of climate tech 2.0 and the beginning of climate tech 3.0. The broad themes of climate tech 2.0 were free money with extraordinary growth stories (eg. Tesla and the cost of solar). Out of the wreckage of climate tech 1.0, we brought to scale all these technologies we had been hoping for for a long time. The next iteration is capital efficiency and integration." Rakesh Shankar, Partner of NextGen Infrastructure at Antin Infrastructure Partners: "When we set the fund up three years ago, we set it up as a next-gen infrastructure fund which has a broader mandate than the pure energy transition. We already have renewable energy assets in our portfolio and we want a diverse portfolio so we're spending more time now on waste-to-value carbon, water, transportation, digital infrastructure etc because that's where the opportunities are right now." I also asked them for their career advice. Listen to the whole Yale University Clean Energy Conference conversation on the Future in Bloom YouTube or wherever you get your audio podcasts. Links below in comments. Yale Center for Business and the Environment (CBEY) Yale School of Management Yale School of the Environment

We’re witnessing a paradox: despite a policy environment seemingly hostile to decarbonization (tariffs on cleantech imports, moratoriums on IRA fund disbursements, and the proposed rollback of DOE programs), U.S. climate tech funding surged by nearly 65% in Q1 2025. But what is perhaps more revealing than the capital flows is the rhetorical shift underway. In response to shifting political priorities, a growing number of startups are revising how they present themselves. Companies are beginning to distance their public messaging from terms like “clean energy,” “net zero,” or even “climate,” instead emphasizing “energy abundance,” “supply chain resilience,” and “domestic industrial capacity.” Others are shifting their messaging to appeal less to climate frameworks like the SDGs and more to the strategic language of national security and defense procurement. On paper, it’s a brilliant strategy. Venture funding is up. Nuclear and geothermal are gaining traction, bolstered by rising AI-driven energy demands and a revived narrative of American energy independence. In theory, this is resilience. But it prompts my question: should this reframing be seen as retreat or evolution? Language shapes how capital is allocated, which technologies are prioritized, and how legitimacy is constructed in the eyes of policymakers and markets. If climate tech can only thrive when it avoids talking about climate change, it risks becoming more about political fit than environmental impact. With that being said, it's no question the sector has always contained a range of compelling motivations (climate-first, profit-first, or both). Maybe this moment simply makes that diversity more visible. The challenge now isn’t whether the sector can adapt (it clearly can). But I wonder whether it can do so without losing sight of its core purpose. If climate ventures become contingent on ideological compatibility rather than environmental necessity, the sector may become structurally less accountable to its original goals. Would love to hear how others are thinking about this as I wrestle with it, both strategically and ethically. Source: https://lnkd.in/eCxFX8Kx #climatetech #decarbonization #energytransition #netzero #sustainability

Over the past couple of years, I interviewed over 80 climate tech leaders to understand why market adoption lags. There's a chasm crossing problem. And I could not find a single resource connecting the dots between demand-side experiences and business fundamentals. So I wrote it. "Becoming Obvious" is a practical guide for founders, leaders, VCs tired of slow growth and dependency on external market forces to shape their demand. It includes: → A breakdown of 3 external demand drivers, 5 types of customer adoption barriers and how leaders can overcome them to develop demand internally → Tools and strategies shaped by 80+ interviews with climate tech founders, leaders, investors and collaborators. → Real company case examples, including Palmetto, Watershed, Solario and more illustrating these principles in action It's free. It's an easy read. No email required. And my team at In-House Intl. Creative made it stunningly enjoyable. Download it and share it with your climate friends :) Link in comments

#HappyEarthDay 🌍 Clean energy investment hit $2.3T globally in 2025. Climate tech raised $77B+ in equity funding. There's a lot happening in this sector. And yet the story is more complicated. Fewer startups are getting funded, early-stage is tighter, capital is concentrating into fewer, larger bets. But #climatetech isn’t disappearing. It’s maturing. We’re moving from: Ideas → infrastructure Vision → deployment Carbon narratives → energy systems And new hubs are emerging: 1. Energy and grid resilience are becoming the core constraint. Electricity demand is rising again for the first time in decades, driven by #AI and #electrification. Grid bottlenecks, interconnection delays, and transformer shortages are now defining what gets built. 2. AI isn’t just a tool; it’s reshaping the energy system itself. Data center electricity demand is surging and could double by 2030. A growing share of climate tech investment is now tied to AI-enabled solutions. 3. Data centers are becoming a major forcing function. They’re driving demand for #nuclear, storage, #hydrogen, and new #grid architectures - and in some cases, even pulling fossil fuel capacity back online to meet load. 4. Energy storage is entering a true scaling phase. #Battery capacity is expanding rapidly, costs are falling, and storage is becoming its own asset class. 5. The frontier is shifting toward physical systems. Low-carbon #fuels, hydrogen, advanced #materials, and #manufacturing are back in focus. At the same time, the geography of climate tech is evolving: 1. SF: capital, AI, and early-stage ideas (9Zero) 2. Boston: deep science and #hardware commercialization (Engine Ventures, Greentown Labs) 3. Houston/Texas: #energy infrastructure and deployment (Greentown Labs) 4. NYC: capital markets and climate finance (Newlab) It’s no longer one hub; it’s a system. The bottleneck isn’t awareness anymore, it’s execution at scale. What’s exciting right now isn’t just “climate tech” as a category, but how deeply embedded it’s becoming in everything else: #infrastructure, #compute, #defense, materials, built environment. Earth Day used to be about asking people to care. Now it’s about building systems that make this change obvious. If you’re building in this space, I’m always curious. 📍Boston #EarthDay2026